Developer Dargey had successes until fraud tripped him up

Related: The spectacular fall of developer Lobsang Dargey

Dargey’s Everett developments

1. Everett Public Market, 2804 Grand Ave. In 2006, Dargey bought and renovated the 1910 building.

2. Potala Place Everett, 2900 Grand Ave. A 220-unit apartment building with ground-floor shops. Except for a bakery, the retail space is still unfinished.

3. Hampton Inn, 2931 W. Marine View Drive. A 120-room hotel built as part of the Potala Place Everett development.

4. Chicago Title, 3006 Colby Ave. Dargey bought and renovated former Federal Building in 2008. It was renamed for its biggest tenant, Chicago Title.

5. Potala Village Everett, 1315 Pacific Ave. Dargey turned a former car lot into a 108-unit apartment building, which opened in 2011.

Dargey’s Seattle-area developments

• Potala Place Shoreline, 15560 Westminister Way, Shoreline. Dargey proposed a six-story building with more than 300 apartments to open in 2017. The empty property was sold in 2016 with the court’s approval.

• Potala Tower, 2116 Fourth Ave., Seattle. The SEC lawsuit halted excavation work on a planned 41-story skyscraper in Seattle’s Belltown neighborhood. Court approved sale earlier this year to a developer.

• Potala Place Othello, 4003 S. Othello St., Seattle. Dargey planned a massive apartment building. The land was sold with the court’s approval.

• Potala Village Kirkland, 1006 Lake St. S., Kirkland. A proposed apartment complex was mired in legal fight with neighbors. Sold with court’s approval.

How a successful developer went down the wrong path

By 2011, Lobsang Dargey had a successful — but short — track record as a real estate developer in Everett. He’d renovated two buildings and opened a third. However, he had bigger plans, which required much more money. He turned to a federal program that gives foreigners a shortcut to a green card for investing in job-creating development in the U.S.

Between 2012 and 2015, Dargey raised more than $150 million from Chinese nationals through the EB-5 program, which is officially the Employment-Based Immigration Fifth Preference program. Dargey also secured $85 million from a commercial lender and an investment firm.

Almost from the start, he illegally moved and spent money in ways never disclosed to investors, lenders or federal regulators. He falsified and forged documents to hide his actions. Below is a comparison of how things looked on paper and what Dargey actually did, as documented in the federal cases — civil and criminal — filed against him.

On paper

➤ Fed-approved projects

Dargey applied for and received federal approval to seek foreign investors via the EB-5 program for Potala Place Everett and Potala Tower in Seattle.

➤ Raising money in China

He raised more than $150 million from Chinese citizens willing to invest $500,000 for a chance at green cards for them and their families.

Investors were given business plans and other material outlining how the money would be used. Dargey promised to put millions of his own dollars into the projects.

Investors used the documents to support their applications for residency in America.

➤ Additional financing

In late 2014, Dargey secured a $25 million construction loan from a U.S. lender, Voya, to complete Potala Place Everett. In 2015, a Shanghai-based firm, Binjiang, put $60 million into other projects, including Potala Tower.

➤ Work started

In 2013, work on Potala Place Everett began. In 2014, excavation for Potala Tower began. With work underway, U.S. immigration officials granted many of the investors temporary residency status.

➤ Expected outcomes

Plenty of people were depending on paydays from the revenue from the completed projects.

In addition to green cards, EB-5 investors expected returns on their money. Binjiang and Voya also expected to profit from helping bankroll the developments. Local and state governments expected tax revenue.

In reality

➤ Fed-approved projects

Dargey’s federal OK to seek foreign investors via EB-5 came with a requirement that the money be used only on the approved developments (Potala Place Everett and Potala Tower). In reality, he siphoned off millions for other projects and his own personal enrichment.

➤ Chinese investors

Dargey told EB-5 investors that a green card was “guaranteed,” something he could neither legally do nor promise.

➤ Additional financing

Getting the money from Voya and Binjiang violated the terms Dargey and EB-5 investors had agreed to. The Voya loan exceeded the project’s debt limit by $10 million, and the Binjiang investment watered down EB-5 investors’ equity.

Dargey gave falsified documents to Voya and Binjiang to hide financial problems, and make it appear that he had personally invested millions of dollars into the developments.

➤ Work stopped on projects

Again using falsified documents, Dargey was trying to get an additional $66 million loan from Voya in 2015 when federal agents raided his offices. Construction halted as a court-appointed receiver sorted out the finances of Dargey’s myriad projects.

➤ Actual outcomes

Starting in 2012, he secretly funneled tens of millions of dollars from approved projects to other uses he lied about to investors and feds, including about $17 million for other real estate projects and $1.4 million went toward his Bellevue home.

Dargey pleaded guilty to two federal charges. Most of his projects have been or will be sold, with the federal court’s approval.

The feds kicked Dargey’s companies out of the EB-5 program. It’s unclear whether Chinese investors will be able to stay in the U.S. or be deported. His settlement with the government prohibits him from future participation in the EB-5 program.